The real estate market, residential and commercial, functions in an archaic manor that has gone essentially unchanged over time. The archaic state of the real estate market is true for several reasons. First, real estate, especially residential real estate, is being bought and sold according to a decades old paradigm. The primary players in the industry are the seller/buyer's agents, i.e., realtors, the loan officers, mortgage originators and title companies. These entities are fairly conservative, somewhat technically unsophisticated, and generally reluctant to embrace change. The characteristics embodied by the primary players results in a process which, for many home sellers and buyers, is shrouded in mystery, appearing arcane and convoluted, not to mention inefficient, inconvenient and expensive.
Typically, one of the most complex and significant financial events in most people's lives is the purchase or sale of a home or investment property. Because of this complexity and significance, people typically seek the help of real estate brokers, sales agents, loan officers and mortgage originators when buying or selling real estate.
Real estate brokers and sales agents are familiar with local zoning and tax laws and, most importantly, know where to obtain financing. Real estate agents usually are independent sales workers who provide their services to a licensed real estate broker on a contract basis. In return, the broker pays the agent a portion of the commission earned from the agent's sale of the property. Brokers are independent businesspeople who sell real estate owned by others; they also may rent or manage properties for a fee. When selling real estate, brokers or agents arrange for title searches and for meetings between buyers and sellers during which the details of the transactions are agreed upon and the new owners take possession of the property. A broker or agent may help to arrange favorable financing from a mortgage originator or lender for the prospective buyer; often, this makes the difference between success and failure in closing a sale. In some cases, brokers and agents assume primary responsibility for closing sales; in others, lawyers or lenders do. Brokers supervise agents who may have many of the same job duties. Brokers also supervise their own offices, advertise properties, and handle other business matters. Some combine other types of work, such as selling insurance or practicing law, with their real estate business.
Besides making sales, agents and brokers must have properties to sell. Consequently, they spend a significant amount of time obtaining listings or agreements by owners to place properties for sale with the firm. When listing a property for sale, agents and brokers compare the listed property with similar properties that recently sold, in order to determine a competitive market price for the property. Once the property is sold, both the agent who sold it and the agent who obtained the listing receive a portion of the commission. Thus, agents who sell a property that they themselves have listed can increase their commission.
Most real estate brokers and sales agents sell residential property. A small number that are usually employed in large or specialized firms sell commercial, industrial, agricultural or other types of real estate. Every specialty requires knowledge of that particular type of property and clientele. Selling or leasing business property requires an understanding of leasing practices, business trends, and the location of the property. Agents who sell or lease industrial properties must know about the region's transportation, utilities, and labor supply. Whatever the type of property, the agent or broker must know how to meet the client's particular requirements, and meeting these needs is critical to making a sale.
Before showing residential properties to potential buyers, agents meet with them to get a feeling for the type of home the buyers would like. In this prequalifying phase, the agent determines how much the buyers can afford to spend. In addition, the agent and the buyer usually sign a loyalty contract which states that the agent will be the only one to show houses to buyers. An agent or broker then generates lists of properties for sale, their location and description, and available sources of financing. In some cases, agents and brokers use computers to give buyers a virtual tour of properties in which they are interested. With a computer, buyers can view interior and exterior images or floor plans without leaving the real estate office.
Agents may meet several times with prospective buyers to discuss and visit available properties. Agents identify and emphasize the most pertinent selling points. To a young family looking for a house, they may emphasize the convenient floor plan, the area's low crime rate and the proximity to schools and shopping centers. To a potential investor, they may point out the tax advantages of owning a rental property and the ease of finding a renter. If bargaining over price becomes necessary, agents must follow their client's instructions carefully and may have to present counteroffers in order to get the best possible price.
Once both parties have signed the contract, the real estate broker or agent must make sure that all special terms of the contract are met before the closing date. For example, the agent must make sure that the mandated and agreed-upon inspections, including that of the home and termite and radon inspections, take place. Also, if the seller agrees to any repairs, the broker or agent must see that they are made. Increasingly, brokers and agents are handling environmental problems as well, by making sure that the properties they sell meet environmental regulations. For example, they may be responsible for dealing with lead paint on the walls. While loan officers, attorneys, mortgage originators or other persons handle many details, the agent must ensure that they are carried out.
The loan officer or loan agent in conjunction with the mortgage originator or mortgage loan broker help clients locate money to borrow and assist them with many objectives including filing-out the required loan application and the additional paperwork necessary in order to process the loan.
Today, most loan officers or loan agents work with a mortgage company. Their attraction is that they provide their loan officers and loan agents with a greater array of money sources through various private and institutional lenders. This allows a loan officer or loan agent to qualify more borrowers. By being better able to meet the needs of a greater number of prospective clients this helps their agents develop a more lucrative career and provides the company with a greater income.
Loan officers and agents facilitate the lending by seeking potential clients and assisting them in applying for various types of loans. Loan officers and agents also gather information about clients and businesses to ensure that an informed decision is made regarding the quality of the loan and the probability of repayment. In many instances, loan officers or agents act as salespeople.
Commercial loan officers, as an example, one working for a bank, may contact firms to determine their needs for loans. If a firm is seeking new funds, the loan officer will try to persuade the company to obtain the loan from their institution. Similarly, mortgage loan officers or agents, those representing various lenders, develop relationships with commercial and residential real estate companies so that, when an individual or firm buys a property, the real estate agent might recommend them to handle the clients financing needs. Once this initial contact has been made, loan officers guide clients through the process of applying for a loan.
The loan process begins with a formal meeting or telephone call with a real estate agent or a prospective client, during which the mortgage loan agent obtains basic information about the purpose of the loan and explains the different types of loans and credit terms that are available to the applicant. Loan agents answer questions about the process and sometimes assist clients in filling-out the required application. After a client completes the application, the loan agent begins the process of analyzing and verifying the application to determine the client's credit worthiness. Often, loan agents can quickly access the client's credit history by computer and obtain a credit score. This score represents the credit worthiness of a person or business as assigned by a software program that makes the evaluation. In cases where a credit history is not available or where unusual financial circumstances are present, the loan agent may request additional financial information from the client or, in the case of commercial loans, copies of the company's financial statements. With this information, loan officers who specialize in evaluating a client's credit worthiness, who are usually working for the lender of the funds, would be asked to conduct a financial analysis or other risk assessment of the potential client. This additional information would be included as written comments in the client's loan file, which is used to analyze whether the prospective loan meets the lending institution's requirements.
The lender or the source of the money, once receiving the loan package would in consultation with their managers, decide whether or not to grant or approve the loan. If the loan is approved, a repayment schedule is arranged with the client. A loan may be approved that would otherwise be denied if, for example, the customer can provide the lender with appropriate collateral-property pledged as security for the repayment of a loan.
A loan officer or agent earns a commission on a completed loan that can be as little $500 to as much as $10,000 or more depending on the loan amount and points or loan fee charged.
In comparison, the job descriptions of the real estate agent and the loan officer have overlapping functions, from what each must do in performing his or her job to how they get paid for what they have done.
Thus, there is a high level of complexity associated with any real estate transaction. And, essentially any real estate transaction is a challenging endeavor. In order to facilitate a residential real estate transaction from beginning to end, the conservative players in the industry must work together. However, in most situations, the primary players in the real estate market are forced to act against their own perceived interests in consummating any real estate transaction. The interaction between the primary players, real estate agents or realtors, loan officers, mortgage originators and title companies, make the home selling and buying process practically unintelligible to the typical home sellers and buyers.
For example, when someone wants to buy a home under the current paradigm, not only must they spend inordinate amounts of time attending open houses and meeting with their real estate agent, they must also meet and communicate with the loan officer, lending institutions, title companies, and escrow officers. As the number of players in the purchase and sale of property increases, the inconveniences and frustration of the potential buyer is exacerbated. In short, despite the rapid advancement of technology in many areas of commerce, buying or selling a home today can be a very frustrating, inefficient, and time-consuming process.
All of the major real estate firms use business models designed to recruit as many salespeople as possible through aggressive commission splits. Because of the commission splits and other factors, none of the existing models are based on the premise of saving the consumer money or making the transaction safer for the consumer, the lender, and the sales person. There is a long felt and unmet need for a real estate system that can guaranty savings for the consumer and the real estate firm through greater efficiencies. All of the major real estate firms have attempted unsuccessfully in making the transaction safer by guarantying savings for the consumer and the real estate firm through greater efficiencies.
Specific accountability with respect to all parties involved is required, but to date is not available. One aspect of specific accountability is to reduce the number of people you have in a transaction. With fewer people involved, the odds of complications during the transaction is lessened and it is easier to determine if a problem exists, and what to do about it. Specific accountability is not accomplished by technological advances such as computers, cell phones, PDAs, and the internet. Specific accountability goes to the very heart of the business transaction, and requires a dramatic change in the way business is done.
To appreciate the magnitude of the undertaking required for implementing a program of specific accountability, it is important to understand the traditional real estate business model. Numerous technological advances such as computers, cell phones, PDAs, and the internet have made significant changes in the way realtors list and advertise real estate. Within the last few decades, the real estate industry has evolved from a system in which realtors marketed their listings from brick-and-mortar storefronts with yard signs and print advertising in local periodicals to virtual offices where realtors can effectively work from their home, car, and even directly from their clients' homes. Innovations such as the internet have made it possible for realtors to market their listings worldwide by utilizing countless websites and search engines. Online databases such as MLS, appraisal districts and industry related websites have given realtors, and the general public, access to valuable information from which to make more informed decisions throughout the selling and buying process. But all these advancements have created less specific accountability, not more.
The mortgage origination industry has also experienced vast improvements in the resources available for taking and processing applications, processing loans, and providing funding for the closings. In the very recent past, homebuyers searching for acceptable financing would be referred to a loan officer at a brick-and-mortar storefront, apply for a mortgage by filling out a hand written application, and wait for an approval. In today's virtual environment, homebuyers can go online and shop from multiple mortgage brokerages and mortgage banks, complete their application, and fax or email their required documentation needed for processing, approval, and ultimately closing. Today's homebuyers have access to limitless information and almost instantaneous pre-approvals.
Although there is no denying the advantages that technological innovations have provided to the real estate and mortgage industries, very little innovation has occurred in the way the home sellers, home buyers, and loan applicants are represented. Although local, state, and federal agencies are continuing to require improvement in the way the consumers are represented in a real estate transaction, the real estate and mortgage industries have done little or nothing to change the status quo. On an ongoing basis, governing bodies are requiring realtors and loan officers to obtain higher levels of industry knowledge, new and increased licensing, and substantially more upfront disclosure.
In just a few short decades, governing bodies have changed the face of many local real estate markets. The local real estate markets have been changed from transactions in which (1) all licensed agents represented only the sellers, (2) the loan officers were not required to be licensed with respect to transactions in which buyers and sellers can be equally represented to, at least, the loan officers being held to a higher degree of accountability through licensing and/or registries. Increased licensing and educational requirements have made some improvements in accountability to the consumer; however, it has not yet resulted in the specific accountability needed to replace the outdated Referral/ABA (Accredited Business Affiliation) system that is currently in place today.
The current Referral/ABA business method operates just like it has for several decades, and even centuries. In the present system, a real estate agent becomes an associate of a real estate brokerage. Although the realtor may be an employee of the brokerage, many times the agent is self-employed and is treated as contract labor. The agent will typically have a written agreement that specifies the terms of the agent/broker association. In many of these written agreements the compensation is spelled out as to what percentage of commission income the agent will receive and what percentage the brokerage will receive. In the traditional Referral/ABA business method, the agent or brokerage will often provide the consumer a particular loan officer's phone number or a list of loan officers to contact for mortgage financing. In many cases, loan officers will work for a mortgage brokerage or a mortgage bank. Like real estate agents, the loan officer may be self-employed and treated like contract labor or be an employee of the mortgage company. Although there are limitless compensation models, in many association agreements, the loan officer is also paid a percentage of the origination proceeds with the remainder going to the company. Despite the many disadvantages to this model, the Referral/ABA business method has been the predominant system for decades, if not, centuries. FIG. 1 is a flow chart of a visual example of a Referral/ABA business method transaction. Through inefficient duplicity, the Traditional ABA/Referral business method adds unnecessary additional costs and confusion to the consumer throughout the home buying, selling, and financing process.
Some of the primary functions performed by a listing agent, buyer's agent, or loan officer during the sale, purchase, or financing of real estate are listed below.                Identify the client's wants and needs. Determine why the client is selling, buying, or in need of financing.        Evaluate the client's credit. Order credit reports and review credit scores, payment history, collection status, and account balances.        Complete loan application. Help client complete the loan application. Applications can be completed online, over the phone, through the mail, or in person.        Obtain documents needed to verify client's income and assets. These include items such as: w-2s, tax returns, bank and investment account statements and other assets.        Determine the type of loan client needs. Establish the down payment (loan-to-value), type (conventional, FHA, VA, subprime), term, and approximate interest rate.        Establish if the client's desired loan conforms to the guidelines. Determine if the client will qualify for the type of loan wanted or needed.        Present alternative loan programs. Allow the client to compare different loan options that offer different down payments, terms, and rates.        Submit completed loan application to processing. Loan file is giving to the processing department for review and submission to underwriting.        Analyze underwriting conditions. Review conditions that will need to be met prior to final loan approval.        Discuss underwriting conditions with client. Present the underwriters findings to the client and prepare responses and solutions to satisfy the conditions.        Coordinate satisfying underwriting conditions with the processing department. Implement a course of action with the processor that satisfies the loan conditions.        Obtain documents needed to satisfy underwriting conditions. Gather items such as verification of employment and verification of rent.        Resolve inaccurate information on client's credit report. Work with the client to help get incorrect or wrong information removed from the credit report.        Review pre-approval with client. Go over the underwriting findings and limitations of the loan with the client.        Review pre-approval with client's agent. Discuss the limitations of the loan with the client's realtor.The loan officer typically does not determine why the client is selling, buying, or in need of financing; ordering credit reports and reviewing credit scores, payment history, collection status, and account balances; or working with the client to help get incorrect or wrong information removed from the credit report. The listing agent identifies the client's wants and needs and determines why the client is selling, buying, or in need of financing. The buyers agent evaluates the client's credit; orders credit reports and reviews credit scores, payment history, collection status, and account balances; resolves inaccurate information on the client's credit report and works with the client to help get incorrect or wrong information removed from the credit report; as well as identifies the client's wants and needs and determines why the client is selling, buying, or in need of financing. The loan officer performs the tasks that the listing agent and the buyer's agent do not do.        
In the real estate realm, essentially all of the firms recruit as many salespeople as possible through aggressive commission splits. Real estate business is not based on the premise of saving the consumer money or making the transaction safer for the consumer, the lender, and the sales person.
There have been attempts to modernize the process. Information technology is sometimes used in the process in a peripheral sense, but is not central to the typical residential real estate transaction. For example, some real estate agents have an online presence, using web sites for providing information to prospective buyers and sellers. Online automation of the loan brokering process is also currently available. However, none of the automated real estate efforts do more than facilitate one or more of the many steps in buying or selling a home. That is, no known real estate effort can rectify the built-in, inherent competitive nature of the primary players in the industry, i.e., the realtors, the mortgage brokers and the title companies. And, the built-in, inherent competitive nature of the primary players in the real estate industry results in a situation that is vague, ambiguous and costly to the buyer or seller. The process is time consuming and inefficient. And in many situations, the real estate system is a system that is adverse to the very entity that it was designed to help, the buyer.
It is, therefore, a feature of the present invention to provide a computer system and method for real estate transactions that results in the buyer receiving clear, unified communication from the primary market entities, a simplified loan process and substantial savings.
A feature of the present invention is to provide a computer system and method that would guaranty savings for the consumer and those assisting the consumer.
Another feature of the present invention is to provide a computer system and method having efficiencies created by dual licenses while making the transaction safer by funneling the responsibility and possible recourse down to one person, one company, or one team.
Yet another feature of the present invention is to provide a computer system and method with fewer people in a transaction, thus fewer people to pay which lessens the odds of complications during the transaction and makes it easy to pinpoint who created problems, or worse, who perpetrated unethical or fraudulent action that harmed the consumer or the lender.
A feature of the present invention is to provide a computer system and method for real estate transactions that results in the selling agent receiving 100% of any predetermined commission.
Another feature of the present invention is to provide a computer system and method for real estate transactions that results in the selling agent not having any desk fees, monthly fees or transaction fees.
Another feature of the present invention is to provide a computer system and method for real estate transactions that results in competitive commission splits for all transactions regardless of who originates the loan.
Another feature of the present invention is to provide a computer system and method for real estate transactions that results in the buyer receiving reliable communications regarding the mortgage loan application and closing process.
Yet another feature of the invention is to provide a computer system and method for real estate transactions that creates a full service agent.
Still another feature of the present invention is utilizing a computer system and method for real estate transactions such that a full service agent can compete in a growing discount realty market without cutting fees.
Another feature of the present invention is to provide a computer system and method for real estate transactions such that a full service agent can compete without being priced out of a transaction when competing with traditional full service companies.
Yet another feature of the present invention is to provide a computer system and method for real estate transactions such that an agent can supplement income with non-sales related loans.
Still another feature of the present invention is to provide a computer system and method for real estate transactions such that an agent takes the mortgage application, and where appropriate, educates the buyer/borrower in the home buying and financing process, orders inspections, maintains regular contact with the buyer and the lender, determines whether the property is in a flood zone, participates in the closing, collects financial information concerning the transaction, and initiates ordering appraisals.
Additional features and advantages of the invention will be set forth in part in the description which follows, and in part will become apparent from the description, or may be learned by practice of the invention. The features and advantages of the invention may be realized by means of the combinations and steps particularly pointed out in the appended claims.